Introduction to Accounting and Accounting Concepts & Principles

Practice flashcards covering definitions, history, components, symbols, and principles of accounting, including the Philippine Accountancy Act of 2004.

According to the American Institute of Certified Public Accountants (AICPA), what is the definition of Accounting?

Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof.

How does the American Accounting Association define Accounting?

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.

According to the lecture notes, what is the simple formula for profit?

$$Money\,RECEIVED - Money\,SPENT = PROFIT$$

In the history of accounting, what location is associated with the earliest bookkeeping records involving slaves and materials for building pyramids?

Babylonia (Iraq)

Who is known as the "Father of modern bookkeeping" and what was the name of his book?

Fra Luca Bartolomeo de Pacioli; Summa de Arithmetica

Who published the first accounting book titled "Libro de l’Arte dela Mercatura"?

Benedetto Cotrugli

Who is recognized as the inventor of double-entry bookkeeping?

Amatino Manucci

Who was the first CPA in the Philippines ($1915$)?

Don Vicente Fabella

In accounting components, which one is considered the "analytical component"?

Identifying

Which phases of the Accounting Information System (AIS) constitute "Bookkeeping"?

Phase $1$ (Data Gathering), Phase $2$ (Analyzing, Measuring and Recording), and Phase $3$ (Classifying, Storing and Summarizing).

What does the Cost-Benefit Principle of an Accounting Information System state?

$$Advantages > Cost$$

Which financial statement is known as a "progress report" showing assets, liabilities, and equity?

Statement of Financial Position (also known as the "Balance Sheet")

What are the four common activities that cause changes in the Statement of Owner's Equity?

Investment, Withdrawal or recovery of capital, Profit, and Loss.

Identify the Primary Users of financial statements.

Existing and Potential Investors, as well as Existing and Potential Lenders and other Creditors.

What are the two Fundamental Qualitative Characteristics of financial information?

Relevance (including Materiality) and Faithful Representation (including Completeness, Neutrality, and being Free from Error).

What does the acronym VCUT stand for in the context of Enhancing Qualitative Characteristics?

Verifiability, Comparability, Understandability, and Timeliness.

What form of business is organized as a separate legal entity from its owners with an indefinite period of life?

Corporation

What types of activities involve obtainment and management of financial resources?

Financing Activities

What is the Going Concern Assumption (also known as Continuity Assumption)?

It means that the accounting entity is viewed as continuing in operation indefinitely in the absence of evidence to the contrary.

Which accounting assumption requires that the indefinite life of an entity be subdivided into equal lengths for reporting?

Time Period Assumption

What is the name of the Philippine law also known as the "Philippine Accountancy Act of $2004$"?

Republic Act No. $9298$

According to Republic Act No. $9298$, who signs the law and how many members compose the Board of Accountancy (BOA)?

Signed by President Gloria Macapagal-Arroyo; the BOA is composed of $6$ members.

What are the minimum grade requirements to pass the Certified Public Accountant Examination (CPALE)?

An average of $75\%$ with no grades lower than $65\%$.